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Why Did Trump Win? Analyzing the Democratic Party Platform: Economics

15 Aug 2018

Prof. Lee Payne has stated that "In 25 years, both Democratic and Republican lawmakers in Congress voted in accordance with their platforms 82 percent of the time." This shows how much Political Platforms matter. Seeing that this is the case, I have decided to analyze the Democratic Party Platform which was voted and approved for the 2016 election. This article will be purely about the Economic views and policies that the Democratic Party supports, analyzing their views on issues such as Minimum Wage, Taxation, Wall Street and so on. Let us dig deep into the “most progressive platform in our party’s history.”

As I read the Preamble, I noticed a very familiar and typical progressive feel good tone. Initially the document covers the achievements of the Economic “prosperity” that Obama achieved, and -blaming the recession on Republicans- comments on how the US needs an economy that works for everyone. Following this is the typical leftist mantra of “Income Inequality” and how there are racial problems in the US. Ironically enough, we are to believe that immigration and diversity are amazing ideas even though they are one of the prime reasons why the US has race issues. The rest of the Preamble is typical political emotionalist jargon based nonsense that is quite worthless to analyze. We would rather spend our time analyzing the actual policies and the platform to see how it holds up, right?

The first section is the Economic policies that Democrats propose to the American people. After their brief synopsis, the first issue they want to tackle is about “Raising Worker’s Wages”. What do we expect to see? The Democrats talking about how they will increase productivity to open up leeways for possible economic prosperity that will inevitably lead to higher real wages? Nope, it is about the minimum wage.

“Democrats believe that the current minimum wage is a starvation wage and must be increased to a living wage.”

Why should we comparing minimum wages with average costs? That’s a very dishonest way to look at this. The Democratic Party wants to raise the Minimum Wage to 15 Dollars per hour, why stop there? Let’s take it up to the next level, raise the minimum wage even more! $15 is obviously not enough, we need $20, $30, $100 per hour, and so on. After all, we need to have a “living wage”.

The illogicality here shows itself by nature, if we added 6 zeros to our minimum wage (example: Raise the minimum wage from $10 to $10,000,000), the price tag of all our goods and services would also have an additional 6 zeros to its right. Comparatively small increases such as 7.25$ to 15$ have another set of problems, what happens to employers that cannot pay its workers 15$ per hour? Guess you’ll have to close your business. In many cases, this does not benefit the worker at all, and in the long term, this will increase costs to cause inflation that will end up with the economy fixing itself and coming back to its "real" state once more. Let us take a look at minimum wage laws all across US states and then take a look at the living wage in each State and compare them. There is an obvious correlation between high minimum wages and high costs. There are many other factors that determine why a state has high costs of living. The point here is that minimum wage is one of those factors and it is simply an artificial increase of wages that does not change “real” wages. People tend to react slowly towards adapting to wage increases, whether they are artificial or not; this is called the sticky wage theory.

Following the minimum wage, the platform sees the Democrats supporting the workers’ right to unionize and the opposition of “Right to Work” laws. There is a very good reason why Democrats support worker organization to form/join unions and also want to remove “Right to Work” laws. The reasoning is that “Right to Work states have lower wages”; yet what they neglect to mention is that Right to Work states also have lower costs. Wanting to remove free choice from an employee, and in the same breath, stating that this is good for the employee seems to be quite contradictory. One of the many real reasons why the Democratic party supports unions is to get union support and their cash-rich endorsements for their political campaigns. The other reason is that this works for unions themselves; this is a political trade between Democrats and Labour Unions. Why unions even have any sway in the labor market is because of their power to collective bargain. This is a continuous process where the employee, together with the labor union, tries to maximize the income that the employee can get. Ask what would happen if an employee made unreasonable demands? The union would put its ace on the field and say that they can organize a strike.

Employers can still hire replacement workers, but the workers wouldn’t mind since they cannot be fired for organizing a strike, and they will most likely be paid by their union during their strike. This causes additional strain to businesses because they would have to use additional funds and resources to hiring replacement workers. Workers do not gain better conditions by fighting businesses; this seems to be pretty self-defeating. Workers gain better conditions and wages by having more businesses competing for workers. When you add the factor of anti-business and anti-market laws such as minimum wage, which the Democrats support, this seems to be a reality that is harder to achieve.

Ignoring fallacious wage gap nonsense, which is just comparing the average income that a man gets with the average income that a woman gets and claiming that this is due to discrimination, one particular statement caught my attention: “While Donald Trump thinks it is “dangerous” for women to leave the home and paid family leave hurts our economy.” Elizabeth “Pocahontas” Warren in 2004 stated that the “Two Income” family economic structure is a trap that “no one foresaw”.

It is somewhat surprising that Donald Trump and Elizabeth Warren do agree on something for once. So why is this the case? The answer might be surprising: Second-Wave Feminism. No joke! it is really simple to observe why Feminism has contributed to a severe wage depression in the US.

Let us engage in a simple thought experiment. Imagine that you lived in a patriarchal society that the only employers and employees were men and women were encouraged to be housewives. Now imagine that a cultural shockwave passed where women wanted to be like men and wanted to work. On top of that, the government passed laws that banned businesses from discriminating you based on your sex. What would this mean for the labor market? There would be a massive increase in possible employees in the labor market of course, but would the demand for those employees increase? Not necessarily, especially when we are talking about a demographic group who didn’t even have independent income beforehand.

When the supply of labor increases but the demand does not change, this causes downward pressure on wages and business would start to negotiate lower wages to fill in more employees with the increased supply. Pretty scary, huh? Well, that’s what actually happened! When women started to enter the workforce, women were already willing to work for lower wages, since their husbands were already contributing to family income, and as Elizabeth Warren pointed out, this affected the economy in such a way that real wages remained stagnant. If you are not convinced by both of our arguments on why “working families” are not good for a nation, take a look at labor force participation rate for women and men and then look at real wages in relation to productivity:

Democrats claim that Corporate Profits are at near-record highs, which -despite being true- is difficult to see what the big deal is, when they talk about how profit-sharing is important.

“That is why, working with business, labor, and other stakeholders, we will incentivize companies to share profits with their employees on top of wages and pay increases, while targeting the workers and businesses that need profit-sharing the most.”

By what means? This is just saying that the Democrats will achieve something, but there is no indication on how they will achieve it. Is “working with business” a fancy way of saying that they will tax them?

Before I move on, I also want to come back to the “Corporate Profits” part. When adjusted for inflation, Corporate Profits are indeed near-record highs; but when was this achieved? During the Obama administration. I am not interested in playing the bad thing happened during Democrat administration, therefore, this is the fault of the Democrats game, but without explaining to us how they will comprehensively achieve “profit-sharing”, how can the American public trust them to not cause the opposite once more? This time, we are told, the corporatists will be brought to heel by yet another candidate running on an anti-corporatist platform but who is beholden to corporate interests. No wonder Middle America stumped for Trump.

Looking the issue of Corporate Profits through the “Corporate” lens, we discover that things aren’t as smooth for corporations as it seems when we add in the trade-weighted US dollar factor that businesses, particularly multinational ones, must care about.

If the Democratic party wants to work together with businesses, then they should tone down their anti-business rhetoric.

Democrats brag about being the party that created Social Security. I don’t know why they are so proud of creating the very formula that is killing the nation. There are many other things about the Democrat platform that are suspect, such as stating that USPS should be revitalized purely because it’s a “national treasure”, which gives the signal that they are more focused on romanticism than solving actual problems.

Democrats do have some solutions on how to create good-paying jobs: For one is infrastructure investments; which Donald Trump also talked about on the campaign trail. Encouraging domestic manufacturing; another point where Donald Trump focused on before the Democrats even considered this as a policy. Democrats say that they are proud that they saved the auto industry, but all it resulted in was tax money being given to big corporations. Isn’t it interesting how the very party that demonizes big businesses, saying that they do not pay their fair share, also says that corporate welfare needs to end and yet still engages in corporate welfare? Why should industries that failed be bailed out by the government on the dime of the taxpayers? Not only does this sound contradictory to the Democratic platform, it also encourages moral hazard. If the car industry bailout had not happened, other companies such as Toyota and Honda would pick up the market share. Jobs in the US would still be recovered. This would also encourage future investors to invest in a sector where the US can truly excel.

I am of the opinion that if something in the market cannot be sustained without subsidies (read: Corporate Welfare), then it does more harm than good. It is wasted investment both from private businesses and from the government itself that use tax money to subsidize otherwise dead industries. That is my big objection with clean energy, which the Democrats want to keep alive. One might argue that fossil fuel industries receive more subsidies; while it is true -fossil fuels received 260 Billion Dollars in subsidies compared to clean energy receiving 140 Billion Dollars- we must remember that fossil fuel is consumed much more compared to other energy sources, especially renewable clean energy. By taking that into account, we can agree that fossil fuel is making the subsidies worthwhile.

This becomes clearer when you look at the jobs that each industry creates to achieve the results above:

At first glance, this might seem like I am making a pro-clean energy argument since it is evident it creates more jobs. Claiming that clean energy is preferable to fossil fuel energy because it creates more jobs is another instance of the broken window fallacy. As you can see, 80% of the energy that was consumed in the US was generated from fossil fuels. Even though clean energy employs more than 3 times more people, fossil fuel is still used a little less than 8 times more than clean energy. This is an incredibly inefficient industry that the Democrats want to keep on life support.

The remaining plans to “create jobs” are about “pursuing innovation” where the Democrats state that they will give special focus to women and minorities in the statement:

“We will nurture the next generation of scientists, engineers, and entrepreneurs, especially women and people of color.”

How this is to be done, is left to the imagination; save for some talk of the non-issue of Net Neutrality, intellectual property law and that NASA is good. Stunning and brave. The remaining plans to create good jobs is about protecting small businesses and creating jobs for America’s youth. Their suggestion to improve small business are “tax reliefs and simplification”. How about just decreasing taxes overall instead of vaguely talking about some tax reliefs and simplifications? There is also talks of “funding and support” which is a fancy way of saying subsidizing, and what appalls me the most is that the Democratic party platform makes small business about how critical it is for “women, tribesmen, people of color and rural Americans”. Would it hurt them to just say “Small Businesses are vital for all Americans”?

The statement from Democrats implies that small businesses are more important for women, minorities, and rural Americans, than those who are not mentioned. I wonder what the reaction would be from the media if the statement was rather “Democrats also realize the critical importance of small businesses as engines of opportunity for Men, Whites and Suburban Americans and will work to nurture entrepreneurship"? If your heart leaps to accusations of sexism and racism after reading my edited statement, then that same moral standard should also apply to the statement coming from Democrats.

When it comes to youth unemployment, once again, if you want jobs to be created that the youth can hop on to and work, you need to remove the minimum wage for those jobs to even exist. Paying businesses to employ young people is not going to work.
Democrats are currently trying to up the ante on their “Wall Street is bad” rhetoric to pander to their nu-socialista base. The hypocrisy here is when they state the following:

“Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again.”

How can you be proud of bailing out the Auto-Industry while at the same time demonizing Wall Street for being bailed out in the past? The double standard here is astounding. Not to mention, which fight are they talking about with the line “Democrats will fight against the greed and recklessness of Wall Street”?When 16 Senate Democrats help pass the “Bank Lobbyist Act”, if the Democrats claim to fight against Wall Street, it seems like they have lost before they even started.

“We will also vigorously implement, enforce, and build on President Obama’s landmark Dodd-Frank financial reform law, and we will stop dead in its tracks every Republican effort to weaken it.”

One Economic Policy that Donald Trump and the Democrats share is their love for Antitrust laws that have been strategically abused in the past. Dominick Armentano in a 1983 interview stated that 95% of antitrust cases are initiated by businesses against other businesses.

It is quite contradictory that the Democrats propose to tackle “cartelization” and “corporate concentration” when they themselves advocate for subsidies -which is one of the key reasons why monopolies even occur- for sectors such as the green energy sectors and healthcare. Monopolies and Corporate Concentrations form not because of evil corporations conspiring against the consumers but because of many barriers the government sets against those who attempt to compete. Punitive taxes and regulations, forcing the cost of doing business higher means we are setting an “entry fee” that only makes the lives of small and competing businesses harder.

One of the most common talking points from the Democrats is “making the rich pay their fair share in taxes”, not only is it already the case, they are overpaying it:

Here lies an even bigger issue. There is a massive problem with the notion of “you should pay more in taxes just because you are rich”. How do the very people who spout egalitarian nonsense support such a notion? If we are all equal, why shouldn’t our contributions to the state also be equal, at least in percentage? It is absurd to attempt to claim the moral high ground in this issue unless you advocate for a flat tax, which the Democrats do not support.

“We will ensure those at the top contribute to our country’s future by establishing a multimillionaire surtax to ensure millionaires and billionaires pay their fair share.”

More like, “Oh, you’re a billionaire who most likely invests a lot in the economy that creates jobs? Tough luck, you are taxed again!” And even if those “Millionaires and Billionaires” didn’t decide to invest and instead use that money for something else, what gives you the moral right to force him to give you his money that he has earned just because the amount of money he has acquired has 6 zeroes? Taxing rich people for the virtue of them being rich by claiming that they didn’t truly earn it is just as abhorrent as surtaxing the poor because of their poverty and “poor fiscal responsibility”.

I do have a lot to say regarding the negative vision of Free Trade that the Democrats have, but the function of this piece is to analyze Democrat policies, not the Democrat policies that are essentially a copy and paste of Donald Trump’s election rhetoric.

Tune in for part 2 where we will talk about the Social policies of Democrats, along with discussing Immigration and Race. Spicy!